City, creditor still a ways apart

SACRAMENTO - With Stockton's bankruptcy trial only six weeks away, attorneys for the city and its lone remaining major creditor debated a variety of technical matters Monday afternoon and drew no closer to a resolution of their differences.

SACRAMENTO - With Stockton's bankruptcy trial only six weeks away, attorneys for the city and its lone remaining major creditor debated a variety of technical matters Monday afternoon and drew no closer to a resolution of their differences.

The next key date in Stockton's effort to exit its Chapter 9 bankruptcy is next Tuesday. On that day, the City Council will consider and presumably approve the agreements the city's attorneys have reached with the vast majority of Stockton's creditors.

"The documents are now 99.9 percent filed," attorney Marc Levinson told Judge Christopher Klein in federal bankruptcy court Monday. The rest will be filed by the end of the week, Levinson added.

One settlement that has not been reached is with the Stockton Ports minor-league baseball team over modified terms for use of the city-owned Stockton Ballpark. It does not appear as if an agreement is near.

"(The Ports) documents will not be in the package (before the City Council) unless a miracle occurs between now and Thursday," Levinson said.

The bigger fish, though, is Franklin High Yield Tax-Free Income Fund and Franklin California High Yield Municipal Fund, which loaned the city $35 million in 2009 for a variety of projects. The city is proposing in its bankruptcy exit plan to repay Franklin less than $95,000.

Levinson sought unsuccessfully Monday to convince Klein to review an offer Franklin made to the city during confidential pre-bankruptcy mediation in 2012.

"We'd like you to see (Franklin's offer)," Levinson told Klein. "You may say, 'It doesn't matter to me. It doesn't impact anything whatsoever.' But since Franklin wraps itself in the flag of, 'We made this great offer,' we'd like you to see it."

James Johnston, Franklin's attorney, argued to the contrary. He said there was "no cause to lift the veil of confidentiality" from pre-bankruptcy mediation. Johnston also said if Franklin's offer was to be revealed, then all aspects of the negotiations during mediation also should be made public.

Klein ended up siding with Johnston but left open the possibility he would review the matter during the trial.

"I don't know who shot whom (in mediation)," Klein said. "I don't know what the offers were, and I don't know what progress may have been made (in mediation). Tell me why I really need to know what Franklin was willing to do before the filing of the case."

The four-day bankruptcy trial begins May 12.

Contact reporter Roger Phillips at (209) 546-8299 or rphillips@recordnet.com. Follow him at recordnet.com/phillipsblog and on Twitter @rphillipsblog.